It’s all about the money; why free cash flow is so important

news.markets – If you want to look at how a company’s performing, don’t just look at its earnings figures and read the analysts’ comments: make sure you look at the cash flow too. That’s what big investors – like Warren Buffett, chief executive of Berkshire Hathaway (NYSE:BRK.A) – do.

Free cash flow is defined as a company’s operating cash flow less its capital expenditure. Essentially, it reflects the cash that a corporation has generated after all its outgoing costs, including operating costs, taxes, dividends and debt payments.